Question

SINGLE LUMP-SUM Below are four independent scenarios relating to the investment of a single lump-sum amount. Calculate the future value of each, using the algebraic formula illustrated in the textbook. Then, verify your answer by reference to the “future value of $1” table. If you have a “business” calculator, additionally verify your calculations using the future value functions included with your calculator.

a) An investment of $2,000 for 6 years and then also for 8 years, at a 6% annual rate, compounded annually.

b) An investment of $1,000 for 6 months and then 1 year, at a 10% annual rate, compounded monthly.

c) An investment of $5,000 for 4 years, at a 5% annual rate, compounded semi-annually.

d) An investment of $15,000 for 4 years, at a 16% annual rate, compounded quarterly.

Answer #1

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(Future value) Sarah Wiggum would
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at the time of her retirement in 28 years. She has found a mutual
fund that expects to earn 5 percent annually. How much must Sarah
invest today? If Sarah earned an annual return of 16 percent, how
much must she invest today?
If Sarah can earn 5 percent annually for the next 28 years,
how much will she have to invest today?
$...

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A) How much will you have at the end of the 50-year
period?
B ) How many times has your money doubled in the 50
years?

What will be the future value?
(1). A lump-sum of $3000 now, in 5 years at 7% compounded
annually.
(2). Series of payment: $3000 at the end of each year for 5
years at 7% compounded annually.
(3). $1000 at the end of the first year, then increase at a rate
of $100 for the following 4 years. The interest rate of 7%
compounded annually.
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for the...

Suppose the opportunity cost of capital is 5% and you have just
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What is the minimum lump sum cash payment you would be willing
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What is the minimum lump sum you would be willing to accept at
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Using the appropriate...

Find the following values:
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percent, annual compounding for 7 years.
b. The future value of a lump sum of $6,000 invested today at 9
percent, quarterly compounding for 7 years.
c. The present value of $6,000 to be received in 7 years when
the opportunity cost (discount rate) is 9%, annual compounding.
d. The present value of $6,000 to be received in 7 years when
the...

1. You expect to receive a lump
sum amount of $20,000 fifty years from now. But you want that money
now. So what is the present value of that sum if the current
discount rate is 7.5%? Assume annual compounding.
2. You have just purchased a $1,500 five year certificate of
deposit (CD) from a savings bank which will pay 3.5% interest
compounded monthly. What will that CD be worth at maturity?
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Determine the amount of money in a savings account at the end of
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Appendix A for an approximate answer, but calculate your final
answer using the formula and financial calculator methods Future
value a. Annually b. Semiannually c. Quarterly

18-a) What would be the future value of $18,000
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annual interest rate is 18 percent, and interest on the investment
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b) How would your answer for (a) change if quarterly compounding
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1. Calculate the present value of an annuity stream that pays
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investment pays 20% compounded quarterly?
2. Calculate the future value of $20,000 invested today for 6 years
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3. Calculate the future value of an annuity stream that pays $6,000
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You have your choice of two investment accounts. Investment A is
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10 percent, also good for 7 years.
How much money would you need to invest in B today for it to be
worth as much as Investment A 7 years from now? (Do not
round intermediate calculations and...

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